Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of ) CC Docket No. 96-45 ) Federal-State Joint Board on ) Universal Service )
To: The Federal-State Joint Board on Universal Service
REPLY COMMENTS OF THE WEST VIRGINIA
CONSUMER ADVOCATE ON THE NOTICE OF
PROPOSED RULEMAKING ON UNIVERSAL SERVICE ISSUES
On March 9, 1996, the Federal Communications Commission ("FCC" or "Commission") issued a notice of proposed rulemaking ("NOPR") on universal service and established a Federal-State Joint Board ("Board") to consider the comments of interested parties concerning universal service. The Consumer Advocate Division of the Public Service Commission of West Virginia ("West Virginia Consumer Advocate" or "WVCAD") submitted comments in response to the questions posed and issues raised by the FCC on April 12, 1996. The WVCAD has reviewed the comments of many of the other parties to this proceeding and offers the following in reply.
SUBSCRIBER LINE CHARGE
On behalf of residential telephone consumers, the WVCAD is most concerned about the comments from many parties which advocate increasing the subscriber line charge ("SLC") in order to support universal service.[1] The WVCAD has seldom viewed such a collection of self-interested irony, which in summary argues: "Let's increase rates to promote universal service." As the National Association of State Utility Consumer Advocates ("NASUCA") stated, "End-user charges amount to rate increases for customers who have no means of economizing to avoid the charge and minimize expenses."[2] An increased SLC charge is in direct counterpoint to a fundamental universal service principle that while not all consumers will be benefitted by the advent of competition, none should be made worse off.
End-user surcharges also countervenes the Telecommunications Act's clear requirement that universal service fund support be funded by telecommunications carriers. (emphasis added) Section 254(d) of the Act states:
Every telecommunications carrier that provides interstate telecomm-unications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the commission to preserve and advance universal service.
The Act does not require, nor contemplate a fixed, non-avoidable monthly charge to end-users.
Those commenters which urge increased SLC charges also ignore the common sense presumption that increasing SLC rates and, therefore, local exchange rates, can only have a detrimental effect on universal service. Increased SLC charges would have a disproportional effect on low and marginal income consumers.[3] A 1986 study conducted by Chilton Research Services on behalf of the WVCAD reported that a monthly increase of $5 (five dollars) would force 4% (four percent) of the telephone subscribers in West Virginia to give up phone service.[4] In its Comments, AT&T recommended that the SLC should be doubled to $7.00 a month to recover the base factor portion of the interstate common line.[5] The Commission should be very aware that any increase in the federal SLC, such as AT&T's proposed $3.50 increase, would likely be in addition to parallel intrastate non-traffic sensitive charges on end-users, using the FCC actions as a model. The cumulative effect of end-user charges on both the federal and state levels would increase non-avoidable costs to marginal income consumers who do not qualify for life-line benefits and inevitably cause many to drop off the telecommunications network.
In its Comments, AT&T states that an increased SLC surcharge . . . "should not be viewed as a rate increase for consumers" since reductions in toll access rates will be passed along to consumers.[6] AT&T, as well as many other commentors, ignores the fact that consumers can only experience a net benefit in a local/toll rebalanced environment if they make a sufficient number of lower-priced toll calls to offset increased fixed end-user charges. However, the aforementioned Chilton Research Services survey found that consumers who would give up phone service as a result of a price increase also had lower long distance charges and lower annual incomes.[7] In addition, a 1986 study showed that 74% (seventy-four percent) of Bell of Pennsylvania's residential customers made no interLATA toll calls whatsoever.[8] It is reasonable to conclude that many consumers will be harmed from so-called rate rebalancing. Low volume toll callers will experience increased telephone costs even if toll rates are decreased.
The WVCAD also notes that there is no guarantee that lower NTS costs will result in lower toll charges. Experience has shown that competitive instinct alone is insufficient to assure a pass through of benefits. For example, in the recent proceeding of Re New England Telephone and Telegraph Co., dba NYNEX, Docket No. 5853, February 13, 1996, the Vermont Public Service Board "took the opportunity to note that recent reductions in charges for switched access for interexchange carriers, a primary reason for the current hike in local service rates, had not been passed on to long distance users."[9]
No increase in the SLC should be allowed. However, if it is decided to unload implicit subsides from the interstate access structure and increase the federal subscriber line charge, the WVCAD agrees with Citizens Utilities Company that "interexchange carriers should be mandated to flow through to their customers, on a dollar-for-dollar basis, the interstate access charge savings represented by the transitional movement of implicit subsidies out of the interstate access structure."[10] To do otherwise would allow an inequitable windfall to toll carriers at the expense of end-user consumers.
DISCOUNTS FOR SCHOOLS AND LIBRARIES
In its initial comments the WVCAD described programs underway in West Virginia related to access to advanced telecommunications by schools, and suggested minimum services which should be provided as a part of the universal service system to be established by the Commission. After reviewing the comments of other parties on this subject, the WVCAD agrees with several commenters who argued that the Commission should not specify any particular technology as eligible for universal service support[11], and that schools and libraries themselves should decide which services they most needed.[12] Both the proposal by ACE to establish a sliding scale of discounts based on the relative use of a particular service[13], and the proposal by Bell South to establish flexible discounts[14] should be viewed favorably by the Commission. Both of these proposals would allow each school or library to use universal service support in a manner which fills their biggest individual needs and best fits their ability to utilize a particular service or technology. In this regard the WVCAD also supports the suggestion by ACE that non-recurring installation or facilities charges should be included as eligible for universal service discounts and funding.[15]
At the other end of the spectrum, the WVCAD opposes GTE's proposal to create a national "Teleschool Czar" who would dictate what services would be provided to schools throughout the country and at what prices.[16] Not only does such a proposal ignore the fact that different schools and libraries across the country have different needs and are at different stages of readiness to utilize particular services, it does violence to the federal approach to universal service embodied in the Act. It should be remembered that under Section 254(h)(1) of the Act, the Commission is to establish discounts and funding mechanisms related to interstate services, while states are to establish universal service mechanisms for intrastate services. In order to preserve flexibility for individual states and individual schools, the Commission should establish broad minimum standards for universal service support for schools and libraries, and then turn over universal service funds collected from interstate services to the various state universal service funds. Administration and use of these funds would then be up to the states. There should be no principles adopted which would inhibit a state from adopting a discount program for schools or libraries more favorable than required by the Commission's minimum standards.
Finally, the Commission should reject Bell South's suggestion that universal service discounts be funded through increased end user charges.[17] All universal service obligations should be imposed on telecommunications carriers on the basis of total revenues, and included as a cost of doing business by each carrier. The cost of discounts to schools and libraries should merely act as an offset to sums otherwise payable to the universal service fund by each carrier. No increased end user charges should be allowed.
Respectfully submitted,
Terry D. Blackwood
Billy Jack Gregg
West Virginia Consumer Advocate
700 Union Building
Charleston, West Virginia 25301
(304)558-0526
(304)558-3610 FAX